Dear Reader,

Many of you have requested more articles on the topic of education; hence, I’ll present another article on useless degrees. In the past, I’ve berated all sorts of useless college degrees: political science, sociology, art history, etc. I’ve even pointed out the problems with my own business degree. But today I want to single out a useless degree that most folks consider fairly prestigious: pre-medicine.

Okay, the degree isn’t completely useless – I’d certainly rather hold a pre-med degree than an art history degree. But nonetheless, its use is limited.

First of all, what is the point of a pre-med degree? It’s a broad survey of chemistry, biology, and physics – but that definition is far too formal. In reality, a pre-med degree is a four-year practice session for the Medical College Admissions Test (MCAT). The degree does not train a student to perform a valuable skill in society; rather, it is merely preparation for a bureaucratic admissions test.

If the degree gets a student into medical school, that’s great. From there, the student can learn real skills and become one of society’s most productive members. Unfortunately, every year thousands of pre-med majors aren’t accepted into medical school. Well, what’s Plan B for them?

Of course, there are plenty of non-medical-degree jobs in medicine, but other degrees better fill these positions. What is more useful to a hospital: a recent pre-med graduate or a recent nursing graduate? In the real world, four years of training to pass the MCAT isn’t exactly an in-demand skill.

Surely there’s space for these students elsewhere. Perhaps a lab would take them. But even in a lab, the student isn’t competitive. Biology and chemistry students often have more lab experience and in-depth understanding of the work. Hence, this route doesn’t exactly put the pre-med student ahead of the pack.

Maybe the prestigious nature of the degree can impress employers in other industries. Here pre-med fails again. For example, the finance sector loves to hire physics majors and sometimes chemistry majors. The math-intensive aspects of these degrees can be easily transferred to other mathematical jobs. But math-wise, a typical physics student can run circles around a typical pre-med student.

And then there’s the biggest problem for pre-med students: Their résumés tell the whole story no matter how they try to gloss it over. If an employer sees a pre-med résumé, there are two thoughts that come to mind. The first is, “This guy obviously couldn’t get into med school.” Thus, the employer is considering a second-rate student. The second thought likely is, “Even if the student is really smart, he’ll be gone soon. Maybe he didn’t get into med school this year, but if the student is intelligent, he won’t be here for long. If it’s not a medical degree, it’ll be another graduate degree to supplement the current lack of skills.”

Hence, one’s résumé gets a large stamp on it that says “second-rate or temporary worker.”

This conundrum might not apply to most of our older readers, but perhaps they will pass this advice down to their kids and grandkids considering a medical career. What’s the solution? First, students should major in a hard science, rather than take a general course of study, and fill the electives with courses to help on the MCAT exams. This was the traditional medical-school route prior to the invention of the pre-med degree.

Essentially betting four years of college on a couple of shots at the MCAT is a bad, expensive idea. I’ve seen people devastated by following this route. It’s always good to have a Plan B. A chemistry degree, for example, can be that plan.

The second solution is more closely oriented with the Casey Research world-view: Go study medicine abroad at age of 18. What’s the point of a four-year pre-med degree when one can become a doctor in another country by the age of 23? Many countries around the world don’t have the ridiculous process of a four-year degree, then the MCAT tests, and then another four or five years of med school. Instead, they throw 18-year-old individuals straight into medical school.

You’ll have to do a bit of your own research to accomplish that goal, but imagine this scenario: Go to a medical school in South America. Get a medical degree in five years. Learn Spanish and experience life in a foreign country. At the end of the process, one could stay in South America as a medical doctor. After all, being a doctor almost anywhere guarantees at least a middle-class existence. And if the medical profession rather than the Mercedes was always the dream, then it’s mission accomplished – and one has saved four years of one’s youth.

Or one could apply to U.S. medical schools from there. Imagine applying to a medical school as a doctor from another country at age 23. The pimple-faced kid with a pre-med degree doesn’t stand a chance against that application.

That’s it for the education thoughts. For the rest of the issue, Kevin Brekke will discuss the terrible condition of California.

California Disinvestment Accelerates

By Kevin Brekke

Poor California. The land of dreamin’ in the ‘60s has awakened from a long slumber to find itself at the bottom of a dog pile of bummed-out karma. That the state is once again being steered by Gov. Jerry “Moonbeam” Brown is an irony not lost on the hopeful denizens of a once-great state looking for redemption. Yet, deliverance from the economic and regulatory sins of several past decades will not be easy.

The recent passage of a budget in California at the eleventh hour includes the usual mix of budget cuts, tax increases, and questionable accounting. It also places a heavy reliance on accurate tax revenue estimations that carry penalties should the state fail to meet them. The budget will ultimately stand or fall on the expectation by legislators that the state will capture $4 billion in tax collections beyond the previous estimate. If this wish upon a star does not come true, the budget will get whacked by another $2.6 billion.

A Bad Assumption

Missing from the entire budget process and estimation game is an examination of a crucial assumption: that the tax base will remain stable. That is, will the number of overburdened taxpayers and businesses that foot the bill for all the spending remain fairly constant? Evidence is mounting that the answer is “no.”

I covered this question in previous articles that take a look at how a state should not be run. A synopsis of the theme would read:

Today, there are multiple combat lines being incised between a number of fiscal, economic, as well as ideological forces. Of all the various combatants, the U.S. states are emerging on the frontlines of the fight. And some of their tactics are encouragingly following free-market principles. Recent events suggest that a battle for tax revenue has commenced, pitting high-tax states against low-tax states.

Those “recent events” refer to falling – or a stunted rise in – state corporate-tax revenue and back-of-the-pack growth performance in gross state product, population, employment, and overall tax receipts in high-tax states such as California.

Another dog just landed on this pile of bad news courtesy of Joseph Vranich, publisher of The Business Relocation Coach blog out of Irvine, California and a consultant who tracks the movement of businesses. His latest research on California concludes:

Today, California is experiencing the fastest rate of disinvestment events based on public domain information, closure notices to the state, and information from affected employees in the three years since a specialized tracking system was put into place.

• From Jan. 1 of this year through this morning, June 16, [California] had 129 disinvestment events occur, an average of 5.4 per week.

• For all of last year, we saw an average of 3.9 events per week.

• Comparing this year thus far with 2009, when the total was 51 events, essentially averaging 1 per week, our rate today is more than 5 times what it was then.

Our losses are occurring at an accelerated rate. Also, no one knows the real level of activity because smaller companies are not required to file layoff notices with the state. A conservative estimate is that only 1 out of 5 company departures becomes public knowledge, which means California may suffer more than 1,000 disinvestment events this year. The capital directed to out-of-state or out-of-country, while difficult to calculate, is nonetheless in the billions of dollars.

The full list of companies that have announced plans to disinvest in California is available via the above link, as well as other dismal data about the current condition of business regulation in the state.

It is worth noting that a disinvestment event entails more than simply a business packing up and heading elsewhere. There are several actions that a company can pursue that are detrimental to the state, and Vranich breaks them down into the following six categories:

• Construction of a facility is cancelled due to California’s costs, taxes, or environmental regulations.

• Full or partial closure. Work shifted to competitors who will perform the work out of state.

• Capital directed to out-of-state growth that in the past would have occurred in California.

• Company considered moving into California but went elsewhere, a decision termed a “U-turn.”

• California lost a new facility to another state or country.

• Out-of-state relocation.

Where Is Everybody Going? And Why?

The top destinations for company relocation or diverted investment include: Arizona, Colorado, Florida, Georgia, Michigan, Nevada, North Carolina, Texas, Utah, and Virginia. Mexico, Canada, and India also made the list. It is no coincidence that some of the states listed here are also routinely ranked as low-tax states by third-party research organizations.

The decision-makers at the companies were interviewed and asked what factors led to a determination to leave the state or redirect investment. Not surprising that, again, taxes and regulatory burdens rank as a significant deterrent. Other incentives to look outside the state include: expensive location; dreadful legal fairness to business; and an excessively adversarial business climate. Chief Executive magazine calls California the “Venezuela of North America.”

And as if it was needed, a new incentive for businesses to leave the state was enacted on April 12, 2011, in the form of a new law requiring utilities to acquire one-third of their power from renewable sources within nine years. California is already home to electricity rates twice the national average. Rates are estimated to increase from 19% to 74% when the new regulation is fully implemented. Further, the upcoming “California Global Warming Solutions Act” has the potential to place overwhelming hurdles that do not exist in other states and countries in front of local companies.

The good news is that California continues to set the standard on how not to run a state. It’s an example that other states are paying attention to and plying the dunderheaded decisions of California legislators to their advantage. Free-market competition between states for business investment, and hence jobs, is under way, and will absolutely intensify as budget deficits squeeze a growing number of U.S. states.

A similar scenario is likely in play for individual California taxpayers as well, although statistics on this are hard to come by. As employers flee the state, it seems logical that job seekers will follow. And as the tax burden for funding government grows faster than the tax-paying population, look for a greater number of taxpayers to become former California taxpayers. The time for dreamin’ is long past. It is the dawning of a new tax age for state governments.

Some trends are easy to spot; others require deep experience and the willingness to take a contrarian perspective. A subscription to The Casey Report gives you access to a crack team with precisely those qualities. Kick the tires for ninety days – it’s risk-free.

Additional Links and Reads

Southern California to Secede from State? (Fox News)

Here’s a story about 13 counties wishing to secede from California and form their own state. Unfortunately, this seems more like an anti-spending PR gimmick than anything else, but it’s still nice to hear. In my opinion, too many states are too big for their own good. In almost all cases, large states become tyrannies of the majority.

Hackers Select a New Target: Other Hackers (New York Times)

This article gets one thing wrong: Other hackers are hardly new targets. Hacker groups have been fighting each other for years, sometimes over nothing more than notoriety. What makes this fight more interesting is that national interests are involved, perhaps for the first time. By the way, don’t these anti-Lulz Security hackers seem a little too determined in the story? I doubt that they’re exposing LulzSec on their own free and unpaid time.

Best Consumer Credit Since ‘06 Reveals Loan Rebound (Bloomberg)

This story reminds me of the polar opposite budgeting of the private sector versus the public sector. Consumers are reducing their debts, and the government is building its. Eventually the government debt will catch up to the consumers, and those who saved the most and spent wisely will receive the most punishment from the taxman in the coming debt national crisis.

That’s it for today. Thank you for reading and subscribing to Casey Daily Dispatch.

Vedran Vuk
Casey Daily Dispatch Editor